The popularity of used cars is set to outpace that of new cars in India, according to new projections from TechNavio.
The country’s rapidly growing economy has led to the emergence of a new middle class with increased spending power. In 2013, India ranked third after the US and China in terms of purchasing power parity, and the spending power of Indian consumers is expected to reach around US$1 trillion by the end of FY2021. The significant increase in disposable income among this new middle class will contribute to a CAGR of 23.46 percent in the Used Car Market in India from 2014-2018.
TechNavio analysts have taken a look at four factors driving growth in the used car market in India.
Entry of OEMs
In the past, the Used Cars Market in India was largely controlled by unorganized players like neighborhood brokers, friends and family. But some major OEMs such as Maruti Suzuki and Tata—two of the earliest entrants in the market— felt that there was strong potential for used cars India. Their strategy was to exchange existing models with new upcoming models, so that customers could get the latest model. This strategy worked, and cemented both OEMs as major players in the used car market.
Nearly all OEMs have a used car division and many of these have capitalized on the potential of the Indian market, with more and more manufacturers establishing a presence in the country.
Reduction in Ownership Cycle of Vehicles
In India, there has been a substantial reduction in the ownership cycle of vehicles. Initially, the average period of car ownership for consumers was five years, but recently this was reduced to two or three years, which has led to a greater supply of used cars in the market.
Increased Demand for Luxury Cars
Carmakers such as Mercedes-Benz and BMW have launched pre-owned car divisions in India to cater to the needs of consumers looking for luxury vehicles. A recent Rush Lane article cites Eberhard Kern, Managing Director and CEO of Mercedes-Benz India, as saying the ”used car market could be the next growth story in the sub-continent’s luxury car segment”.
Increase in Online Auto Portals
It is estimated that around 30 percent of Indian consumers refer to internet sources and automobile portals to search for relevant information before buying a used car. Automotive portals such as Gaadi.com, Autoportal.com, and Carwale.com are popping up more and more, in order to cater to the need for easily accessible information. These portals provide relevant information about new and used cars, act as a platform for buying and selling vehicles, and allow customers to compare prices and see financing options.
